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Debt Consolidation Options
There are many different options that fall under the umbrella
term “debt consolidation plans.” What exactly can a
consolidation entail? Consolidating your debt can be done
through refinancing your home, taking out a home equity loan,
obtaining an unsecured loan, or a debt management plan. Each of
these plans comes with its own advantages and disadvantages.
Refinancing and Home Equity Loans
Many people consider refinancing their home or take out home
equity loans to pay off their credit cards and other debts. The
major advantage of this option is usually a much lower monthly
payment. However, there are many drawbacks to this option. To
even qualify for a home equity loan (or to qualify for a
mortgage to refinance), you must own a home and have substantial
equity in it. If you do possess adequate equity in your home, it
can still be difficult to qualify for a loan if you are behind
on your debts or otherwise have poor credit.A debt consolidation plan that involves refinancing or using the
equity in your home has one other major drawback. These loans
turn your unsecured debts into a debt that is now secured by
your home. If you are unable to pay these debts, you run the
risk of losing your home through foreclosure.
Personal Unsecured Loans
Another means of consolidating debt is obtaining a personal,
unsecured loan. With this option, you do not have to own a home
or convert your unsecured debts into a secured debt. However, it
can still be difficult to qualify for this type of loan if your
credit is inadequate, and your monthly payment may not be lower
than what you were originally paying.
Debt Management Plans
A debt management plan is yet another option for consolidating
your debt. With a debt management plan you do not have to own a
home or qualify for a loan. With this option, a credit
counseling agency works with your creditors to potentially get
you lower interest, waived late and over the limit fees, and
possibly a lower monthly payment. This debt consolidation plan
is a great option for those who are behind on their payments,
are over their credit limits, or have high interest rates. If
you would like to learn more about debt management plans and
other debt consolidation plans, contact a credit counselor
today.
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